Xstrata, ENRC, Prudential, Wolseley, BSkyB and Kazakhmys push FTSE 100 lower
Overview: The FTSE 100 was in decline today, shedding 0.45% to drop below 5,600 as commodities absorbed a heavy hit from declines in oil and metal prices, while today’s US data turned out to be slightly below expectations.
The Fed’s Empire State manufacturing index measuring business conditions in New York State slid from 24.9 to 22.9 in March. The Federal Reserve said that industrial output growth slowed to 0.1% in February amid heavy snowstorms, compared to January’s 0.9% increase.
Just five FTSE 100 constituents gained more than 1% today. Royal Bank of Scotland (LSE: RBS) was the top performer with a 1.8% gain, while energy company Centrica (LSE: CNA) followed with a 1.7% improvement. Pharmaceutical company Shire (LSE: SHP) added 1.3%, while insurers Old Mutual (LSE: OML) and Admiral Group (LSE: ADM) were up 1.1%.
Miners were the heaviest fallers among the blue chips, responding to lower metal prices. Xstrata (LSE: XTA) and Eurasian Natural Resources (LSE: ENRC) were at the bottom of the index with losses of over 2.5%. Other notable fallers included insurer Prudential (LSE: PRU), which declined 2.4%, plumbing and heating equipment manufacturer Wolseley (LSE: WOS), which slid 1.2% and broadcaster BSkyB (LSE: BSY), down 2.1%.
US stocks opened lower today as the Dow Jones Industrial Average slid 0.3%, while the boarder S&P 500 index declined 0.5% and the technology heavy NASDAQ composite was down 0.7%.
Commodities
Oil retreated ahead of tomorrow’s OPEC (organization of Petroleum Exporting Countries) meeting, which is expected to produce a decision on production quotas for the current year. The oil cartel’s current targets stand at 4.2 mmboe (million barrels).
The current supply levels are expected to remain the same amid a clouded outlook for the ongoing economic recovery. The oil minister of Iran, which usually champions lower supply levels to support crude prices at a high level, said that prices are likely to remain around US$80/barrel this year and his country was against production increases or any changes to the current targets.
Last week, OPEC upped its demand forecast for the current year yesterday, projecting the global consumption to grow by an additional 0.9 mmbbls/d (million barrels per day) to 85.24 mmbbls/d provided that the ongoing economic recovery firms.
IEA (International Energy Agency) also revised its oil consumption forecast for 2010 upwards by 1.6 mmbbls/d to 86.6 mmbbls/d this year. The IEA also upped its global demand estimate for 2009 to 85 mmbbls/d.
May Brent Crude slipped to US$78.62/barrel, while US light, sweet crude declined to US$79.83/barrel.
Blue chip oil and gas producers showed little movement today. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) posted gains of less than 1%, while BG Group (LSE: BG), Cairn Energy (LSE: CNE) and Tullow Oil (LSE: TLW) declined marginally.
Amec (LSE: AMEC) also posted a small gain, while fellow oil and gas engineering group Petrofac (LSE: PFC) lost 1.3%.
Most midcaps declined. Dragon Oil (LSE: DGO), Premier Oil (LSE: PMO) and Soco International (LSE: SIA) were flat, while Heritage Oil (LSE: HOIL) and Dana Petroleum (LSE: DNX) lost less than 1%. Salamander Energy (LSE: SMDR) and Melrose Resources (LSE: MRS) declined 1.6% and 2.4% respectively.
JKX Oil & Gas (LSE: JKX) went against the tide, climbing 2.5%.
Services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) shed 1.1% and 2.6% respectively.
Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) moved with the sector, sliding 8% and 6.5% respectively. Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) and energy investor Xtract Energy PLC (AIM: XTR) were down 3.7%.
North America focused oil & gas junior Pantheon Resources (AIM: PANR) and Europe focused oil and gas developer Ascent Resources (AIM: AST) did better, tacking on 5% and 4.5%.
Gold retreats to $1,104, silver drops
Gold retreated after making gains in the morning, settling at US$1,104/oz after almost reaching US$1,110/oz earlier in the day, facing pressure from speculation of the possible launch of a gold-backed European monetary fund.
The yellow metal was subdued by rumours that EU states are looking to set up a European monetary fund, which would be backed by their gold reserves. Speculation of possible moves by the EU to confront its mounting debt problem have heated up amid the meeting of European finance ministers that has kicked off in Brussels today with debt issues in some of the euro zone countries, primarily Greece, being on top of the agenda.
The uncertainly over Greece’s debt crisis has kept the euro under pressure for weeks, though worries eased two weeks ago when the debt laden country introduced a fresh package of economic austerity measures aimed at saving some €4.8 billion and conducted a successful bond issue to raise another €5 billion to meet its near term commitments. However, last week rating agency Fitch triggered another wave of jitters by promising to cut the current AA rating of another troubled euro zone country Portugal if its fiscal consolidation proceeds at a slow pace and proves insufficient. Portugal also conducted a bond issue, raising US$1.34 billion.
A stronger US dollar weakens gold, which is seen as a riskier alternative and usually moves inversely to the American currency.
News from China also weighed on commodities after the country reported that its inflation rate reached an annualised 2.7% in February despite the government’s measures to curb lending that were introduced in the previous month. China said that the rate was still within its 2010 target of 3%, though it was not enough to eliminate speculation of further monetary policy tightening in the country.
Other precious metals headed in different directions as silver declined to US$17.04/oz, while platinum improved to US$1,613/oz.
All major miners were in decline today. In the FTSE 100, platinum producer Lonmin (LSE: LMI), silver miner Fresnillo (LSE: FRES) and gold miner Randogld Resources (LSE: RRS) lost 1.5%, 1.3% and 1.2% respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) declined marginally.
Silver producer Hochschild Mining (LSE: HOC) was at the bottom of the pile in the FTSE 250 with a 2.7% decline. Aquarius Platinum (LSE: AQP) was close, shedding 1.5%, while fellow midcap Petropavlovsk (LSE: POG) was down 2%.
Western Australia operating Norseman Gold (AIM: NGL) and Uzbekistan focused gold miner Oxus Gold (AIM: OXS) performed well, tacking on 4.5% and 3% respectively. Commodity asset development company Mercator Gold (AIM: MCR) headed in the opposite direction, slipping 18%, while Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) declined 4%.
Miners tumble as metals fall
Base metals fell sharply as copper and nickel dropped to US$3.32/lb and US$9.69/lb respectively, while zinc slipped to US$1.02/lb.
Base metal miners fell, tracking lower metal prices. Xstrata (LSE: XTA) led the decline with a 3% loss. Eurasian Natural Resources (LSE: ENRC), Kazakhmys (LSE: KAZ) and Antofagasta (LSE: ANTO) followed, shedding 2.6%, 2.3% and 2.2% respectively. Vedanta Resources (LSE: VED) was down 1.4% and Anglo American (LSE: AAL), BHP Billiton (LSE: BLT) and Rio Tinto (LSE: RIO) all retreated 1.2%.
Copper and nickel explorer Regency Mines (AIM: RGM) was the top performer among the juniors, rallying 24.5%. Tunisia focused metal miner Maghreb Minerals (AIM: MMS) added 6.7%, while Russia focused copper and nickel miner Amur Minerals (AIM: AMC), Indonesia operating coal miner Churchill Mining (AIM: CHL), Botswana operating nickel and copper miner Discovery Metals (AIM: DME) and mineral sands producer Kenmare Resources (LSE: KMR) all tacked on more than 5%.
Australia focused coking coal producer Caledon Resources (AIM: CDN) and laterite nickel specialist European Nickel (AIM: ENK) headed in the opposite direction, sliding 5% and 3.5% respectively.
Banks, insurance, private equity
Banking stocks were mixed today. Royal Bank of Scotland (LSE: RBS) was in the lead, climbing 1.5%. Fellow part-nationalised bank Lloyds (LSE: LLOY) was down 1.5%, while Barclays (LSE: BARC) slid 1% and HSBC (LSE: HSBA) declined marginally and Standard Chartered (LSE: STAN) was flat.
Insurance stocks also were mixed. Old Mutual (LSE: OML) was ahead with a 1.1% gain, while Admiral Group (LSE: ADM) and Standard Life (LSE: SL) tacked n less than 1%. Prudential (LSE: PRU) was at the bottom of the pile with a 3.2% slide, while Aviva (LSE: AV) declined 1%. Legal & General (LSE: LGEN) and RSA Insurance Group (LSE: RSA) shed less than 1%.
Private equity group 3i (SLE: III) held steady.
Large and Mid Cap News
Distribution and outsourcing group Bunzl (LSE: BNZL) saidf that it has acquired Weita Holding AG and its subsidiaries from Christoph Huber. Financial details were not disclosed.
Small Cap News
Diamondcorp (AIM:DCP, JSE:DMC) that is has conditionally raised £7.1 million (£6.6 net) at 7 pence per share. Looking at the chart of Diamondcorp since listing (February 2007), it is pretty clear that this junior diamond company has had its fair share of difficulties. Perhaps more pertinent however is the fact that Diamondcorp is still listed, and is now in a position to issue more than 100 million shares – double the current number outstanding – to move its Lace Diamond Mine in South Africa closer to production. Granted the placing was completed at a 26% discount, and the dilution is eye watering for current shareholders, but it is no mean feat raising more than double the current market capitalisation of your company. It is also worth noting that approximately 70% of the new money was raised from current shareholders, reflecting a hefty amount of faith in the management to deliver.
Gulf Keystone Petroleum (AIM: GKP) has completed a fully subscribed placing of 20.9m new shares at a price of 76.5p per share, raising gross proceeds of approximately £16 million. The company said it intends to use the proceeds to fund its ongoing activities in Kurdistan, with a 2010 work campaign planned for the Shaikan and Sheikh Adi blocks.
Aurelian Oil & Gas PLC (AIM: AUL) said it appointed John Conlin as a non-executive director and chairman-elect. It is intended that Conlin will become chairman at the company's annual general meeting, to be held in May, when David Prior will step down from the role while remaining as a non-executive director.
Firestone Diamonds (AIM: FDI) said it intends to apply for a secondary listing on the Botswana Stock Exchange (BSE), and has appointed Capital Securities of Botswana as its sponsoring broker for the proposed listing. The listing application is expected to be made shortly, and the company’s shares are expected to join the exchange in Q2 2010.
Metals Exploration (AIM: MTL) has been awarded he Environmental Compliance Certificate (ECC) for the Runruno gold-molybdenum project on the island of Luzon in the northern Philippines following a positive evaluation of the project’s environmental impact statement by the Environmental Management Bureau (EMB).
Amphion Innovations (AIM: AMP) said its partner company Kromek has raised £12.3 million in the second close of the oversubscribed Series D financing, which has upped Amphion’s stake in the business that is now valued at £52 million to 17%.
Seeing Machines (AIM: SEE) has been awarded its first contract under its major framework agreement with Freeport-McMoRan Copper & Gold (NYSE: FCX) announced in February. Under the contract, Seeing Machines will supply its DSS driver monitoring equipment to Freeport’s Grasberg mine in Indonesia. Grasberg is the world’s largest gold mine and the third largest copper mine.
Landore Resources (AIM: LND) said that an independent technical study at the Lamaune iron prospect at the Junior Lake property in Ontario has identified an exploration target of 545 Mt (million tonnes) at an average grade of 29% Fe (iron).
In an update to investors, Stellar Diamonds (AIM: STEL) said it has moved quickly to restructure its operations and fast track production following the completion of its reverse takeover of West African Diamonds in February. The company said it is harnessing operational and corporate synergies resulting from the merger, and also noted that it has benefited from a strong recovery in the rough diamond market, as reflected in recent sale prices.
Iron ore focused investor Red Rock Resources (AIM: RRR) said samples from a percussion drilling programme at its Migori gold project in Kenya are being prepped for ICP (inductively coupled plasma) analysis and gold and base metal assaying at the laboratory in Mwanza, while samples from reverse circulation (RC) drilling completed in late 2009 and early 2010 are being prepared for transportation to the laboratory to undergo an assay. The company has also received results from 2007 drilling at Migori.
In a note to investors, London-based stockbroker Astaire Securities said that Ascent Resources’ (AIM: AST) diverse project portfolio enjoys access to established infrastructure and strong European gas pricing. The broker calculates Ascent’s total NAV of 14p per share, identifying considerable upside from the current market price of around 5.8p.
Blackswan Equities retailed in 'buy' recommendation for Discovery Metals (AIM: DME, ASX: DML) and target price of A$0.90 per share after the Botswana operating nickel and copper miner last week reported on the results from 26 exploration drill holes at the Boseto mine, which Blackswan said demonstrated “significant potential to add existing resources and extend Boseto’s mine life".
Specialty music business Fluid Music Canada (TSX: FMN) wants to list its shares on the AIM market of the London Stock Exchange, expecting its shares to start trading in London on 14 April 2010.
Syntopix (AIM: SYN) has proposed a placing of nearly 3 million shares to raise £2 million to undertake further human use studies with its lead compounds that are set to commence this year.
Altona Energy (AIM: ANR) has appointed Peter Fagiano as senior executive in charge of project technology to join the Arckaringa Joint Venture (JV) management committee, which is responsible for the JV’s operations and decision making on all key matters.
